K Streeters Counteract Losses by Diversifying

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Public records indicate the growth plans of K Street entrepreneur Steve McBee have slipped. But despite the gloomy picture derived from his annual Lobbying Disclosure Act filings, business at McBee Strategic Consulting is expanding, its founder assures.

McBee’s decision to diversify beyond lobbying work has more than made up for the decline, he said. He recently purchased the D.C. public relations shop Gibraltar Associates, for example.

It’s a story that’s playing out throughout the influence industry. Just six of the top 25 lobby practices posted revenue growth last year over 2011, according to the filings. In response, big K Street practices are trying to replace lost lobbying dollars with messaging, grass-roots organizing or social media advocacy. The shops are also doing more work with the Obama administration and state and foreign governments that isn’t covered under the LDA.

“I think the advocacy market and the LDA numbers are going to be better this year than they were last year,” McBee predicted. “But I think hoping and waiting for the market to return doesn’t make good business sense. So if you’re looking to unlock growth, you’ve got to be willing to invest in secondary markets to drive revenue.”

The LDA reports, filed with Congress this week, offer the best barometer of K Street’s fortunes. But the forms detailing fees, clients, lobbyists and policy issues don’t reveal everything.

Cornerstone Government Affairs also reported a decline in LDA revenue in 2012 and 2011. Firm founder Geoff Gonella said his shop has branched out into state lobbying. It now has offices in Louisiana, Mississippi, Texas, Iowa and Illinois — all outposts that share connections with D.C.-based Cornerstone employees, he noted.

“We saw a little of what was coming as far as the environment here in D.C., the political environment and the economic environment, and we looked to diversify,” Gonella said.

In 2012, Cornerstone’s state offices represented about 70 clients and brought in a little more than $3 million in revenue, Gonella said. Those clients and that revenue are not subject to the LDA.

Some of the fastest-growing firms measured strictly by LDA revenue weren’t among K Street’s top 25 for 2012. They did not follow the typical bipartisan mold of the top tier, either.

Heather Podesta + Partners, an all- Democratic shop, didn’t make the top 25, but with more than $7.9 million in LDA fees for 2012, it saw an approximately 13 percent uptick in business from the previous year. Some of Podesta’s new clients included energy drink maker Red Bull North America Inc. and the Pew Charitable Trusts. (Heather Podesta is married to Podesta Group founder Tony Podesta.)

The all-Democratic firm Elmendorf | Ryan posted similar growth of about 13 percent, reporting $8.6 million last year, up from $7.6 million in LDA fees in 2011.

The all-GOP Clark Lytle Geduldig & Cranford has been on an aggressive growth streak, reporting a 31 percent uptick in LDA revenue for 2012, to $4.7 million. That 31 percent looked small compared with Clark Lytle’s 96 percent LDA revenue boost between 2010 and 2011.

The most dramatic dip among the top 25 was at Ogilvy Government Relations, which posted 30 percent less revenue in 2012. The shop lost some of its biggest rainmakers, including GOP powerbroker Wayne Berman, who went inhouse with his client Blackstone.